Abstract “The Chinese government is aware that it cannot afford large-scale unemployment, so it is trying to push manufacturing employees to the service industry. This will delay the outbreak of financial problems, but it will also make the scale of the crisis even bigger. Although China’s service industry is Continuous improvement, still can't...
“The Chinese government is aware that it cannot afford large-scale unemployment, so it is trying to push manufacturing employees to the service industry. This will delay the outbreak of financial problems, but it will also make the scale of the crisis even bigger. Although China’s service industry is constantly Progress, still can not make up for the loss in the manufacturing industry." The famous investor Soros in the interview with the "First Financial Daily" reporter as always has expressed pessimism about China's economic prospects. 
On January 19, the figures released by the National Bureau of Statistics showed that the preliminary accounting, the gross domestic product (GDP) of 67.7 trillion yuan in 2015 was calculated at comparable prices, an increase of 6.9% over the previous year. At the same time, in 2015, the proportion of the service industry in China's economy exceeded 50% for the first time, reaching 50.5%, far exceeding the target of 47% in the 12th Five-Year Plan. The service sector in developed countries accounts for more than 60% of the economy as a whole.
Soros continued to sing the Chinese economy last week at a seminar called "The End of China's Economic Miracle?" at the Asian Association of New York. Soros has said that he is shorting Asian currencies, and he will make a profit if the Chinese economy declines.
Credit expansion drives growth unsustainable
Soros said at the seminar: "In March, when I saw a lot of credit growth, it was used as a signal that the economy is recovering. But for me, this is a warning signal, this is a warning signal. Because this This means that China now needs so much credit to stop the economic downturn...because I see it needs more credit to stop the economic downturn."
In the first quarter of this year, China's GDP grew by 985.1 billion yuan, a growth rate of 6.7%, exceeding the previous government's 6.5% annual growth target. According to data released by the People's Bank of China on the 15th, the scale of social financing in China increased by 6.59 trillion yuan in the first quarter, an increase of 1.93 trillion yuan over the same period of last year, the highest level in history. Among them, RMB loans to the real economy increased by 4.67 trillion yuan in the first quarter, and direct financing, especially corporate bond financing, increased significantly, both hitting record highs.
Zhu Guangyao, deputy minister of finance, previously stressed that credit rating agencies have lowered their credit ratings in China. In an interview with foreign media, the Chinese government’s debt-to-GDP ratio remains below the 40% security line. “There are some risks in the business, which is why we have to promote de-leveraging,†he said.
Soros believes that the Chinese economy cannot afford large-scale unemployment, so the government is constantly promoting the prosperity of the construction industry and the real estate industry. Although this does bring economic growth, it is still “self-sufficientâ€.
“Like the United States a few years ago, China is now experiencing a substantial expansion of credit scale, and this expansion will eventually be unsustainable. But China is still able to maintain such a situation, so the moment when the economy suddenly turns will be more than expected. It’s late in the coming,†Soros said. “The same was true of the United States during the 2008 financial crisis. In 2005 and 2006, many people thought that the financial crisis was coming, such as former Federal Reserve Chairman Paul Wall. However, in fact, the financial crisis only officially broke out in 2007-2008."
In the economic crisis, governments in accordance with Keynesian theory to counter the cycle by stimulating economic policies to reduce shocks and avoid "hard landing."
“In China, according to the 2015 data, in order to obtain growth per unit, 7 units of credit must be invested,†Soros commented.
In 2015, China’s GDP was 67.7 trillion yuan, an increase of 4.1 trillion yuan from the 63.6 trillion yuan in 2014. According to the People's Bank of China, the scale of social financing in 2015 was 15.41 trillion yuan, 467.5 million less than the previous year. Soros’s 7-fold increase in credit input data does not know where it comes from.
The renminbi is linked to a basket of currencies is progress
The International Monetary Fund (IMF) pointed out in the Global Financial Stability Report released on April 13 that among the corporate loans issued by Chinese commercial banks, there are 1.3 trillion US dollars of loans from those whose profitability is difficult to maintain interest. The paid enterprises accounted for 15.5% of the total loans of commercial banks. If adjustments are not made in time, the losses to commercial banks may reach 7% of GDP. However, Jin Zhongxia, executive director of the Chinese IMF, believes that the method of estimating the report only looks at companies whose profits are less than interest expenses, and does not consider that loan companies can repay interest by means of collateral, real estate assets or business restructuring. At the same time, it is assumed that the listed companies and non-listed companies, which account for only 18% of the total loans, have the same debt burden and risks, and may overestimate the non-listed companies with lower leverage.
Soros believes that the Chinese financial system is "higher than the deposits" due to high investment and low efficiency. He believes that this is not only troublesome in terms of assets, but also more troublesome in terms of liabilities, because it depends on the liquidity provided by the system, while other banks must lend to each other, which is additional uncertainty and instability. origin of. "Most of the money that banks now supply must be used to keep bad and bad companies alive." Soros said, "You can close some branches, but you can't actually shut down the entire company. You can close the factory, but you can't close it. The entire company without the need to cancel the debt."
According to the main regulatory indicators released by the China Banking Regulatory Commission in the fourth quarter of 2015, the non-performing loan ratio of commercial banks in China reached 1.67%, rising for 10 consecutive quarters, and the balance of non-performing loans has also risen for 17 consecutive quarters. As of the end of 2015, the total assets of the national banking industry was 199.3 trillion yuan. The normal loan balance of commercial banks was 74.9 trillion yuan, including the balance of normal loans of 72.0 trillion yuan and the balance of concern loans of 2.89 trillion yuan. The balance of non-performing loans in the banking industry was 1.27 trillion yuan. In the fourth quarter, the bank's new bad balance was 88.1 billion yuan. Commercial banks have good ability to withstand risks, and the weighted average core Tier 1 capital adequacy ratio is 10.91%. Soros said that the bank loan-to-deposit ratio has been lifted from the regulatory ceiling last year.
Although Soros has claimed to be selling some Asian currencies, his evaluation of the RMB exchange rate reform is very positive. Compared with the exchange rate policy in which the renminbi was only pegged to the US dollar, Soros believes that linking the renminbi to a basket of currencies is an improvement, greatly reducing the external fear of competitive devaluation.
Soros said: "There is a true G2 between China and the United States. The United States hopes that China can participate in the international financial system. Although it is a competitor, it can increase cooperation while formulating rules, which can gradually restore the market."
Soros has affirmed that Chinese companies have gone abroad to seek acquisitions and partners around the world. He believes that this is a phenomenon that needs to be accepted. Chinese companies need to diversify their investments, and moving funds overseas is a reasonable means of solving problems.
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